Before the Court en banc. Opinion by Justice Saitta.
Justices Cherry and Parraguirre dissented.
In this writ petition, the Court held that NRS 40.459(1)(c), which was added to Nevada’s law by Assembly Bill 273, may not apply retroactively to limit the amount of a deficiency judgment that can be recovered by persons who acquired the right to obtain the judgment from someone else who held that right. The protections of NRS 40.459(1)(c) are therefore only applicable to judicial foreclosures or trustee’s sales occurring on or after the effective date (June 10, 2011) of the statute.
Petitioner Sandpointe Apartments, LLC (“Sandpointe”) received a loan from Silver State Bank in 2007 for the construction of an apartment complex. The loan was secured via a deed of trust on the real property and backed by a personal guarantee from Petitioner Stacy Yahraus-Lewis. Silver State Bank closed in 2008 and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. After Sandpointe had already defaulted on its loan in 2009, the FDIC sold the loan and personal guarantee to Multibank, which then transferred its interest in the loan and guarantee to its wholly owned subsidiary, real party in interest, CML-NV Sandpointe, LLC (“CML-NV”). In early 2011, CML-NV foreclosed on Sandpointe’s loan and purchased the real property securing the loan at a trustee’s sale.
Subsequently on June 10, 2011, the Governor signed Assembly Bill 273 into law, which had been unanimously passed by the Nevada Legislature. The relevant provision, codified as NRS 40.459(1)(c), provides that if “the person seeking the [deficiency] judgment acquired the right to obtain the judgment from a person who previously held that right,” then the person seeking the deficiency judgment may only recover “the amount by which the amount of the consideration paid for that right exceeds the fair market value of the property sold at the time of sale or the amount for which the property was actually sold, whichever is greater, with interest from the date of sale and reasonable costs.”
CML-NV filed a complaint against Sandpointe and Yahraus-Lewis for deficiency and breach of guaranty on June 27, 2011. At a hearing on cross-motions for summary judgment, the district court concluded that NRS 40.459(1)(c) only applies to loans entered into after June 10, 2011. Thereafter, Sandpointe and Yahraus-Lewis petitioned the Supreme Court for a writ of mandamus or prohibition directing the district court to apply NRS 40.459(1)(c) to CML-NV’s deficiency judgment.
Nevada statutes are presumed to operate only prospectively unless the Legislature clearly manifests an intent to apply the statute retroactively or it clearly appears from the statute itself that the Legislature’s intent cannot be implemented in the absence of retroactivity. A statute has retroactive effect when it takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past.
The Court held that the right to a deficiency judgment is a vested right as of the date of a trustee’s sale, which is when the amount of a deficiency is fixed. Related statutes, such as NRS 40.462(1), provide that the right to receive proceeds from a foreclosure sale vests at the time of the sale. Thus, the Court found it logical that the right to a judgment for the amount not received in a foreclosure sale would arise, and vest, on the same date as the right to receive amounts received from the sale. Applying NRS 40.459(1)(c) to deficiencies arising from sales prior to the enactment of the statute would affect vested rights and therefore would have an impermissible retroactive effect.
An investigation into legislative intent was considered unwarranted by the majority as NRS 40.459(1)(c)’s provision that it becomes effective upon passage and approval is plain and unambiguous. Even if legislative history were consulted though, the majority noted that the author of Assembly Bill 273 stated on several occasions that the legislation could not be applied retroactively. Moreover, the presumption against retroactivity was not considered rebutted simply because the statute would have a broader impact if applied to transactions prior to 2011 as prospective application could still accomplish the legislative intent with respect to many loans.
The Court rejected Petitioners’ argument that NRS 40.459(1)(c) is not retroactive because the statute merely clarifies existing law. Although another statute, NRS 40.451, limits a lien amount to the amount of consideration paid, the Court noted that the lien amount is only one factor determining the total amount of indebtedness, which is the figure used to determine the deficiency judgment amount. Additionally, the Court distinguished NRS 40.459(1)(c) as applicable to guarantors unlike NRS 40.451.
Justices Cherry and Parraguirre dissented from the majority holding and would have granted the writ petition on the basis that the real party in interest had not yet obtained a deficiency judgment. The dissent argued that NRS 40.459(1)(c) applies at the time that a deficiency judgment is lawfully obtained and that until such judgment, a creditor only has a contingent remedy for potential deficiency and not a vested right.
The dissent found persuasive the statement in the Legislative Counsel Digest that the provisions of Assembly Bill 273 would “apply to a deficiency judgment awarded on or after” the effective date and the Legislature’s corresponding declaration in its amicus curiae brief that it intended NRS 40.459(1)(c) to apply to every deficiency judgment awarded on or after the effective date. Noting the policy rationales of stopping profiteering activities and ensuring fairness to all parties to a transaction secured by realty, the dissent criticized the majority opinion for ignoring these objectives and denying protection to borrowers and guarantors who were the intended beneficiaries of the legislation. Petition denied. (Adam Hosmer-Henner, Associate in the Reno office of McDonald Carano Wilson.)
